Incorporated: 1961
NAIC: 551111 Offices of Bank Holding Companies; 522110 Commercial Banking; 522210 Credit Card Issuing; 522292 Real Estate Credit; 523110 Investment Banking and Securities Dealing; 523120 Securities Brokerage; 523130 Commodity Contracts Dealing; 523920 Portfolio Management; 523930 Investment Advice; 523991 Trust, Fiduciary, and Custody Activities; 525910 Open-End Investment Funds
The Canadian Imperial Bank of Commerce (CIBC) is Canada's third largest bank, trailing only Royal Bank of Canada and Bank of Nova Scotia. Based in Toronto, CIBC functions through three main operating units: CIBC Retail Markets, CIBC Wealth Management, and CIBC World Markets. CIBC Retail Markets serves more than nine million individual customers and nearly 470,000 small business customers in Canada through a network of about 1,100 branches and more than 4,400 automatic bank machines (ABMs), as well as four telephone banking centers and an Internet banking channel. The principal financial services offered by this unit include personal banking, small business banking, credit cards, and mortgages. CIBC Wealth Management maintains a network of 2,500 investment advisors responsible for C$193 billion in client assets under administration. The unit's services include investment advice, full-service and online discount brokerages, private banking, and trust services, and its three families of mutual funds--Renaissance, Talvest, and CIBC--make the bank the number four mutual fund provider in Canada, managing more than C$36 billion in assets. CIBC World Markets is a major investment bank operating throughout Canada and the United States, with a more modest presence in the United Kingdom and Asia. CIBC was formed through a 1961 merger between the Imperial Bank of Canada, which was founded in 1875, and the Canadian Bank of Commerce, which traces its origins back to 1867.
The older of CIBC's two predecessors, the Canadian Bank of Commerce, was founded in 1867, the same year as Canada's confederation. While Canadian statesmen discussed the advantages of uniting the British North American Colonies under one parliament, a prominent Toronto businessman, William McMaster, was busy acquiring a bank charter from a group of financiers who had been unable to raise the necessary capital to put it to use. They had been granted a charter for an institution to be called the Bank of Canada in 1858, but McMaster adopted the name Canadian Bank of Commerce, opening the new bank on May 15, 1867. Under his leadership, the bank grew at a tremendous rate. The bank's paid-up capital swelled from C$400,000 to C$6 million in its first seven years, and it soon had offices in New York and Montreal as well as throughout Ontario. Canada was in the midst of an industrial revolution at this time, and the Bank of Commerce was instrumental in financing a number of large capital projects. For its first 20 years, the bank's prosperity fluctuated with economic conditions, but in general it grew and was profitable.
In May 1893 the bank joined the Canadian push westward by establishing a branch in Winnipeg. In 1898 branches were established in Dawson City, Yukon Territory; Vancouver, British Columbia; and Skagway, Alaska. In 1901 the bank acquired the Bank of British Columbia, strengthening its position on the Pacific Coast. During the next ten years the Canadian Bank of Commerce acquired several other financial institutions, including Halifax Banking Company (1903), Merchants Bank of Prince Edward Island (1906), and Eastern Townships Bank (1912); by the start of World War I, it had 379 branches.
During the 1920s the bank nearly doubled its branch network by acquiring the Bank of Hamilton and later the Standard Bank of Canada. The general prosperity of the 1920s was reflected in the bank's growth. At the time of the stock market crash in 1929, the Canadian Bank of Commerce's assets were C$801 million. The Depression that followed, however, took a heavy toll on the bank, and its assets did not return to their pre-Depression high until 1940.
World War II finally brought economic recovery to Canada. The Canadian Bank of Commerce was active in the war effort, leading victory loan drives among other things. After the war, the bank grew steadily. By 1956, assets had reached C$2.5 billion, and by 1960, they had passed C$3 billion. Despite this success, however, the bank felt pressured by increasing competition and in 1961 agreed to a merger with the Imperial Bank of Canada.
The Imperial Bank of Canada was established in Toronto in 1875. Its first president, Henry Stark Howland, had been the vice-president of the Canadian Bank of Commerce. The bank's first office actually had no vault--overnight deposits were stored at another bank--yet in its first year of operation, the Imperial Bank made a profit of C$103,637. Reluctant to open too many branches too soon, the Imperial Bank's growth was somewhat slower than that of the Bank of Commerce during the same period. By 1880, however, the Imperial Bank had frontier fever. That year it opened a branch in Winnipeg, and the next year it expanded to Brandon and Calgary. By 1900, the Imperial Bank had 32 branches spread across the continent. Between the turn of the century and World War I, Canada began to tap its mineral resources with amazing speed. The Imperial Bank of Canada earned the nickname the "Mining Bank" because of its ties to that industry.
After World War I, the bank opened about 50 branches within just a few years, but not all of them survived the volatile economic conditions that followed the war. In the 1920s, deposits reached record levels, but the stock market crash in 1929 caused severe problems for the bank. Many of its loans went bad, and a number of branches were closed. The bank struggled to recuperate during the late 1930s and by the end of the decade it was making headway once again.
During World War II costs of operation rose faster than earnings, leading to lower dividends during the war years. About one-third of the Imperial Bank's 1,800 employees enlisted in the various services, and 53 died.
After the war, Canada entered a period of widespread prosperity and the Imperial Bank grew rapidly. In 1956, it acquired Barclays Bank (Canada) and increased assets by nearly $40 million; by 1961, the Imperial Bank had assets of more than $1 billion and 343 branches.
The amalgamation of the Canadian Bank of Commerce and the Imperial Bank of Canada in 1961 created the largest bank in Canada at the time, with total assets of C$4.6 billion. The new Canadian Imperial Bank of Commerce had at its helm L.S. Mackersy, of the Imperial Bank, as chairman and N.J. McKinnon, of the Bank of Commerce, as president and CEO. Altogether the new bank accounted for about one-quarter of the assets of all Canadian banks combined.
In 1962 McKinnon became chairman of CIBC's board of directors and steered the bank's course from that position until 1972. The 1960s were a prosperous time for Canada, and the nation's economy grew strongly. The Canadian Imperial Bank of Commerce's net earnings increased substantially each year throughout the decade. The bank also strengthened its foreign operations. At the end of the decade, Canada relaxed some of its restrictions on the banking industry. Notably, interest rates on loans were no longer limited to 6 percent. In this liberalized banking climate, Canadian banks did very well. In 1969 CIBC added 46 new branches while expanding its workforce by only 5 percent. That same year, CIBC also became the first Canadian bank to install 24-hour cash dispensers, which would evolve into ABMs. By 1970, annual profits had risen to C$43 million, more than twice what they had been at the time of amalgamation.
In the early 1970s, Canada began to invest heavily in energy development and agriculture, and the Canadian Imperial Bank of Commerce helped with the financing. Throughout the decade the bank had a close relationship with Canadian oil companies. That relationship would eventually cause the bank problems, but in the early 1970s, when oil prices were skyrocketing, investment in petroleum-related industries seemed like a gold mine.
In 1973 J.P. Wadsworth replaced McKinnon as chairman of CIBC, and remained in office until 1975. Late 1973 brought worldwide recession. Although Canadian domestic demand was adequate, overseas demand was low. This spelled trouble for Canada, whose economy was heavily dependent on exports. Nonetheless, CIBC continued to improve its earnings each year.
In 1976 Russell E. Harrison succeeded Wadsworth as chairman and CEO of CIBC. Harrison tended to run the bank in an autocratic manner. Top executives were not always given real power to make key decisions. In the late 1970s and early 1980s Canadian industry grew very quickly, and CIBC made large loans to many expanding firms. In 1980, however, this policy began to falter. Massey-Ferguson, the Canadian tractor manufacturer, was in danger of collapsing, and the Canadian Imperial Bank of Commerce was Massey's biggest lender. The Canadian government worked with Massey's creditors to try to bail the company out by allowing it to raise new capital, but it did not work. Massey lost US$240 million in 1981, and US$413 million in 1982, leaving CIBC with a substantial amount of bad debt.
The Dome Petroleum Company was another of CIBC's large corporate debtors in deep trouble in the early 1980s. When oil prices dropped sharply in 1982, Dome lost more than C$100 million; CIBC had loaned Dome more than C$1 billion. The failing company was eventually bought by Amoco Canada, but again CIBC was left with a pile of bad debt. Between 1979 and 1984, CIBC had the lowest average return on assets of the five largest Canadian banks.
In May 1984 R. Donald Fullerton took over as CEO and set about restructuring the bank's operations. Fullerton eliminated branches to cut costs and service overlap and injected new blood into the bank's senior management. He also attacked the bank's bad debt, slowly eliminating bad loans from the bank's portfolio.
In 1985 a record number of farm failures caused mild concern among Canadian bankers. Canadian Imperial estimated that about 10 percent of its agricultural loans were in jeopardy. The problem was not nearly as severe in Canada as it was in the United States, however, where thousands of farmers defaulted on loans.
Under Fullerton's leadership, the bank bounced back from the troubles of the early 1980s to set a new earnings record in 1985. An aggressive new advertising campaign was launched in the United States as part of the bank's thrust internationally. In 1986 Fullerton announced that CIBC would split its operations into three separate units: the Individual Bank, the Corporate Bank, and the Investment Bank.
Each unit was to deal with a specific group of customers. The Individual Bank was CIBC's largest unit, employing three-quarters of the bank's workers to serve individuals and independent business people. The Corporate Bank was intended to provide standard financial services to a variety of Canadian and foreign companies. The Investment Bank was intended to take advantage of the upcoming liberalization of capital and other investment markets in Canada. It oversaw the operations of CIBC's brokerage firms and merchant banks overseas, and then domestically after June 1987, when Canada removed the regulations barring commercial banks from conducting investment banking activities. CIBC Securities Inc. was established in 1987 to offer stockbroker services. The bank also participated in a merchant bank, the Gordon Investment Corporation, with the Gordon Capital Corporation--each was an equal partner in the new bank. In Europe, CIBC operated CIBC Securities Europe Ltd. (formerly Grenfell and Colegrave Ltd., a U.K. firm acquired in 1986), and a stock brokerage for its overseas customers.
In 1987 Brazil announced that it would suspend interest payments on its foreign loans indefinitely. This action shocked the international banking community, which feared that other Third World countries would follow suit. In August 1987 the Canadian government issued a guideline that required banks to set aside a large sum to protect against possible losses on loans to Third World countries. CIBC set aside C$451 million, resulting in a net loss of C$63 million for 1987, though assets increased by almost C$8 billion.
Continuing its diversification in the newly deregulated environment, CIBC purchased a majority stake in the Wood Gundy Corporation, a leading Canadian investment dealer, for C$203.3 million in June 1988. The bank subsequently formed CIBC Wood Gundy, which offered asset management services for corporate and institutional clients. In 1989 CIBC gained an option to acquire Morgan Trust Company of Canada. When necessary revisions to the federal Bank Act went into effect in 1992, CIBC completed the acquisition, which formed the basis for CIBC Trust.
Worldwide deregulation, liberalization of financial markets, and information technology made banking more complex during the mid- and late 1980s. CIBC responded innovatively to a changing marketplace. The bank regained the lost ground of the early 1980s and made a greater effort to expand overseas than any other Canadian bank. But CIBC still held a significant portfolio of potential problem loans that it would have to correct if the bank was to thrive in the 1990s. To that end, CIBC management worked to improve its loan portfolio and to increase efficiency throughout its system during the late 1980s and early 1990s. It also shed employees in bloated divisions, while bolstering growing business segments.
Among the new business arenas targeted by CIBC were insurance and derivatives. CIBC's foray into insurance reflected ongoing bank-industry deregulation during the early and mid-1990s that was intended to give banks the opportunity to compete more effectively in evolving financial markets. CIBC was inundated with more than 50,000 inquiries when it began selling automobile insurance early in 1995. It subsequently began offering term life insurance. The company's efforts related to derivatives were the result of its intent to become a major player in the burgeoning derivatives market. CIBC hired a top-notch staff to compete in the risky investment niche, and was enjoying positive results in 1995. That same year, CIBC acquired Argosy Group, a junk bond dealer based in New York, and FirstLine Trust, a Toronto firm with a C$5 billion portfolio of residential mortgages.
Largely as a result of new business ventures, CIBC boosted its asset base to C$186.51 billion by 1995. Although sales remained relatively steady during the early 1990s, the bank posted a disappointing C$108 million loss in 1992, the same year that Al Flood took over as chairman and CEO. Net income surged to C$600 million in 1993, though, and then to a healthy C$890 million in 1994; one year later, CIBC saw its net income surpass the C$1 billion mark, becoming only the second Canadian bank--following Royal Bank of Canada (RBC)--to reach that level. Furthermore, CIBC's loan portfolio was much more secure by 1995 than it had been only a few years earlier. In addition, the organization continued to branch out globally, as evidenced by its 1994 listing on the Jamaica, Barbados, and Trinidad stock exchanges.
Mergers and acquisitions--some thwarted and some completed--dominated the news about Canadian Imperial Bank of Commerce in the late 1990s. Early in 1997 CIBC entered into talks with Imasco Limited to acquire Imasco's subsidiary CT Financial Services Inc., a Toronto-based financial services holding company operating under the name Canada Trust. Discussions ended, however, when the federal government told the parties that it would not approve the deal. (CT Financial was subsequently acquired in 2000 by the Toronto-Dominion Bank.)
In 1997 CIBC grabbed for a larger piece of the global securities markets by acquiring Oppenheimer & Co., Inc., a U.S. full-service securities firm, for US$525 million. Oppenheimer was subsequently merged with CIBC Wood Gundy to form CIBC World Markets, which was positioned as CIBC's international investment bank.
In January 1998 it appeared the banking megamerger wave that was roiling the U.S. banking and financial services sector was finally going to head north when RBC and Bank of Montreal, two of the top five Canadian banks, announced a merger that would create a new banking behemoth with total assets of nearly C$500 billion. Then, just three months later, the Toronto-Dominion Bank, the fifth largest Canadian bank, and CIBC followed suit by announcing a merger of their own to create what would have been the ninth largest bank in North America, with combined assets of C$466 billion. In December 1998, however, Canadian Finance Minister Paul Martin rejected both the proposed merger between Toronto-Dominion and CIBC and that of RBC and Bank of Montreal. Ignoring the banks' insistence that they needed to merge in order to compete in the increasingly globalized financial services market, Martin concluded that from the standpoint of Canadians the mergers would create two banks with too much power and would severely reduce competition.
There was other bad news at CIBC during 1998 as well. The CIBC World Markets unit suffered a net loss of C$186 million during the fourth quarter of fiscal 1998 as a result of pursuing the wrong markets during a period of international market turmoil. The poor performance at CIBC World Markets sent profits for Canadian Imperial Bank of Commerce tumbling by 32 percent for the full year. CIBC World Markets subsequently cut its staff by about 5 percent and pulled back from its global ambitions. It began refocusing primarily on the Canadian and U.S. markets, pursuing only some niches in the United Kingdom and the Asia Pacific region.
Given the troubles at CIBC World Markets it came as somewhat of a surprise when John S. Hunkin, the head of that unit, was named CIBC chairman and CEO, succeeding the retiring Flood. Soon after taking over in June 1999, Hunkin launched a reorganization aimed at flattening the bank's hierarchy and cutting costs. CIBC restructured into four operating units: electronic banking, retail and small-business banking, wealth management, and CIBC World Markets. Hunkin aimed to cut annual operating costs by C$500 million.
Searching for new ways to grow, CIBC in the late 1990s began partnering with major supermarket chains in both Canada and the United States to set up private-label electronic retail banks operating out of kiosks at the supermarkets' outlets. CIBC partnered with Loblaw Companies Limited to form President's Choice Financial in 1998. This was followed by the creation of Marketplace Bank in conjunction with the southern U.S. chain Winn-Dixie Stores, Inc. and Safeway Select Bank, which began operating in the western United States at supermarkets run by Safeway Inc. In 2000 these ventures were amalgamated under a new subsidiary called Amicus.
Canadian Imperial Bank of Commerce also sought to divest noncore operations during this period, aiming to focus more of its attention on its core banking business. In 1999 the bank exited from the life insurance and emergency travel insurance businesses. Then the following year, CIBC sold its home and auto insurance subsidiaries to Desjardins-Laurentian Financial Corp. for about C$330 million, leaving it virtually out of the insurance sector.
During 2001 and 2002, CIBC completed a series of acquisitions to build up its wealth management operations. The bank acquired the 34 percent of TAL Global Asset Management Inc. it did not already own and also bought Merrill Lynch Canada's private client and asset management businesses. As a result, CIBC created the largest full-service brokerage in Canada with more than 1,400 brokers. The bank also became Canada's fourth-largest provider of mutual funds. In another strategic move, CIBC in October 2002 merged its Caribbean banking operations with those of Barclays Bank PLC to create FirstCaribbean International Bank Limited. CIBC held an equity interest of about 43 percent in FirstCaribbean.
CIBC reacted almost immediately to the negative economic fallout from the events of September 11, 2001, by announcing that it would slash about 2,000 jobs from its workforce (a reduction of about 4 percent), increase its loan-loss provisions by nearly 60 percent, and sell off C$1 billion of unwanted loans and credit commitments. Fiscal 2002 turned even bleaker for CIBC as it was forced to set aside C$1.5 billion for bad corporate loans, including hundreds of millions it had loaned to two of the most famous victims of the now-burst stock market bubble: Enron Corporation and Global Crossing Ltd. At the same time, the ambitious Amicus venture continued to bleed red ink, losing C$871 million in both the United States and Canada between 2000 and 2002. Thus in October 2002 CIBC announced that it would shut down the U.S. operations of Amicus; the Canadian arm, which appeared to be on the road to profitability, would continue to operate. A restructuring charge of C$525 million--mostly related to the Amicus pullback--coupled with heavy loan-loss provisions, resulted in a fiscal 2002 fourth-quarter loss of C$100 million, CIBC's first quarterly loss since 1992.
One of the strategies for pursuing a turnaround adopted by CIBC management was to reallocate resources away from the riskier activities of CIBC World Markets and toward the more dependable operations of CIBC Retail Markets and CIBC Wealth Management. The goal was to have 70 percent of the bank's capital allocated to the latter two units, which would be a sizeable increase over the 50 percent figure of 2002. In January 2003 a major step was taken toward achieving this goal when CIBC sold its Oppenheimer private client and asset management businesses in the United States to New York-based Fahnestock Viner Holdings Inc. for C$354 million. CIBC succeeded in mounting a major comeback in fiscal 2003, reporting net income of C$2.06 billion.
While the outlook for Canadian Imperial Bank of Commerce certainly appeared to be brightening, the bank had to grapple with a number of legal issues related to some of the corporate scandals that grew out of the excesses of the 1990s. In December 2003 CIBC reached an agreement with the U.S. Securities and Exchange Commission to pay $80 million to settle civil charges that had been brought, alleging that the bank had helped Enron hide debt and inflate its profits by more than US$1 billion through intricate financial manipulations. CIBC also faced a number of civil suits that had been brought by Enron shareholders. The scandal involving illegal late-day trading in mutual funds ensnared CIBC in its widening web by early 2004 when it was reported that the bank was facing imminent regulatory action for making more than US$1 billion in financing available to investors who subsequently made illegal mutual fund trades.
Principal Subsidiaries
CIBC Asset Management Inc.; CIBC Mortgages Inc.; CIBC Trust Corporation; CIBC World Markets Inc.; Canadian Imperial Holdings Inc. (U.S.A.); CIBC World Markets Corp. (U.S.A.); TAL Global Asset Management Inc.; CIBC Holdings (Cayman) Limited; CIBC Offshore Banking Services Corporation (Barbados); CIBC Australia Limited; CIBC World Markets (Japan) Inc.; CIBC Asia Limited (Singapore); CIBC World Markets plc (U.K.).
Principal Operating Units
CIBC Retail Markets; CIBC Wealth Management; CIBC World Markets.
Principal Competitors
Royal Bank of Canada; Bank of Nova Scotia; The Toronto-Dominion Bank; Bank of Montreal.
Further Reading
Atlas, Riva D., "Canada Bank Is Said to Face Legal Action by Regulators," New York Times, January 28, 2004, p. C1.
Barnes, Angela, "Chairman of CIBC Places Emphasis on Teamwork," Globe and Mail, March 29, 1985, p. R7.
Blackwell, Richard. "CIBC Widens Insurance Effort," Financial Post, February 24, 1995, sec. 1, p. 11.
------, "New CIBC Boss Promises Shakeup," Globe and Mail, April 2, 1999, p. B1.
"Can Canada's No. 2 Bank Stop Its Slide?," Business Week, June 11, 1984, p. 57.
Craig, Susanne, "Angry Bankers Face an Uncertain Future," Globe and Mail, December 15, 1998, p. A1.
Dalglish, Brenda, "Banking on Change," Maclean's, November 2, 1992, pp. 46+.
Darroch, James L., Canadian Banks and Global Competitiveness, Montreal: McGill-Queen's University Press, 1994.
DeCloet, Derek, "Banker with Attitude," Canadian Business, June 11, 1999, pp. 33-34, 36, 38.
------, "King of the World," Canadian Business, July 10-July 24, 2000, pp. 56+.
Edinborough, Arnold, A History of Canadian Imperial Bank of Commerce, Volume IV: 1931-1973, Toronto: Canadian Imperial Bank of Commerce, 1995.
Gibbon, Ann, "CIBC, TAL Create Giant Funds Manager," Globe and Mail, January 20, 1994, p. B1.
Haliechuk, Rick, "CIBC Grooms Staff for Play in Derivatives," Toronto Star, January 20, 1995, p. E8.
Heinzl, Mark, "CIBC to Merge with Toronto Dominion," Wall Street Journal, April 20, 1998, p. A3.
Kalawsky, Keith, "CIBC Goes Wal-Mart," Financial Post, September 13, 2003, p. FP7.
------, "How Hunkin Put CIBC on Course," Financial Post, December 23, 2003, p. FP1.
Kraus, James R., "Canadian Giant in Big Move Toward Investment Banking," American Banker, March 31, 1994, pp. 1+.
Milner, Brian, "CIBC's Fullerton Stepping Down," Globe and Mail, December 7, 1991, p. B1.
Mittelstaedt, Martin, "CIBC's Sweeping Austerity Plan Includes Layoffs, Salary Restraint," Globe and Mail, June 17, 1982, p. B4.
------, "Harrison Resigns As CIBC Chairman," Globe and Mail, January 18, 1985, p. B1.
Noble, Kimberley, "Bitterness on Bay Street: Ottawa Hands the Banks a Resounding Defeat," Maclean's, December 28, 1998, pp. 70-73.
------, "How the Banks Blew It," Maclean's, December 7, 1998, pp. 26-30.
Partridge, John, "CIBC Aims for Big Payoff: Forms Canada's First Integrated Global Investment Bank in Radical Reshaping," Globe and Mail, March 31, 1994, p. B3.
------, "CIBC Chairman Sets Sights on First Place," Globe and Mail, January 15, 1996, p. B1.
------, "CIBC Finally Pulls the Plug on U.S. Electronic Banking Unit," Globe and Mail, November 15, 2002, p. B1.
Ross, Victor, and Arthur St. L. Trigge, A History of the Canadian Bank of Commerce, 3 vols., Toronto: Oxford University Press, 1920-1934.
Stewart, Sinclair, "CIBC Agrees to Settle over Enron Allegations," Globe and Mail, December 23, 2003, p. B1.
Stewart, Sinclair, and Andrew Willis, "CIBC Sells U.S. Retail Broker," Globe and Mail, December 11, 2002, p. B1.
Stoffman, Daniel, "Poor Little Rich Bank," Canadian Business, May 1, 1996, pp. 44+.
Wilson-Smith, Anthony, "The Challengers," Maclean's, April 27, 1998, pp. 40-44.
— Updates: Dave Mote, David E. Salamie
